Opinion: If Steve Case should call, I'm on the next plane.
Nobody believed in the potential of the Internet more than America Online founder Steve Case. And no ones reputation has been so tarnished as a result of such belief. Its unlikely Case will ever live down the rap of being the architect of the "worse business deal in history," but that part of his life is now officially closed.
Steve Case this week crawled out of the limelight, resigning as a director of Time Warner, the company that five years ago he merged with AOL.
Case has a new venture, vaguely Internet-related, that hes stocked with a roster of other damaged executive talent. I guess misery really does love company.
You will remember that in 2000, Case made a hugeand losingbet, using his companys wildly inflated stock price to purchase the much larger Time Warner. The combined entity was renamed AOL Time Warner.
At the time, the merging of traditional and "new" media seemed to make sense, though few were keen on AOLs purchase such a much larger company. But, AOL had lots of money and Case decided to spend it.
I was among those who thought hed lost his mind, his tiny (by comparison) online company buying one of the worlds largest media and entertainment companies.
The scale of the deal seems outlandish today, but reflected the state of the dot-com era at the moment it took place. Six months later, the purchase would likely have been impossible.
What happened next was the stuff of business school horror movies: The old-line media company had what amounted to an auto-immune reaction to its new owner, never making good on any of the supposed synergies that existed between them.
Time Warner then effectively walled off the "foreign body" that was trying to take it over.
Click here to read more about Case stepping down from his seat on the board of directors at Time Warner.
Saying that AOL was a tumor on Time Warner would not be too much of an overstatement, at least from Time Warners viewpoint.
As problems with the deal became apparent, Case lost power and, in 2003, the companys chairmanship, though he remained on Time Warners board until his resignation on Monday. Shortly after Case left as chairman, the company dropped AOL from its name.
If anyone has forgotten what a bad deal it turned out to be, let me quote from a recent story in Fortune magazine:
"AOL Time Warner, valued at about $290 billion after the merger announcement in January 2000, shed more than $150 billion of that market value by January 2002. The company wrote off almost $100 billion in goodwill, settled Securities and Exchange Commission and Department of Justice investigations for $360 million, and set aside $3 billion to resolve shareholder lawsuits. Case, however, did very well by the deal: From 1999 through 2002 he sold stock valued at $475 million."
Contributing editor David Coursey has spent two decades writing about hardware, software and communications for business customers. He can be reached at email@example.com.
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